This post will update the status of these bills and add one that I neglected to highlight in the prior posts. I’ll begin with the oversight.

HB 2218 Makes the unlawful and unlicensed practice of contracting, real estate brokering, or real estate sales, in connection with a consumer transaction, unlawful under the Virginia Consumer Protection Act. In short, it makes explicit what was implicit, namely that contractors that perform work without a license are in violation of the VCPA. This bill has passed the house by unanimous vote and is in committee at the Senate. UPDATE– As of February 20, 2019, this bill has passed both houses, all that is left is the paperwork.

The Statute of Limitations House introduced bill (HB 1667) bill has been left in the Appropriations committee of the House with a request for further study. The analagous Senate (SB1369) bill has passed the Senate. My “sources” (read those at the AGC-VA) tell me that the bill is being pushed hard in the House. UPDATE– As of February 19, 2018 this bill has been passed by indefinitely by the House. My understanding is that it will be studied and reintroduced.

HB2409 which reconciles the statutes and forms for mechanic’s liens has passed the House and awaits passage in the Senate. I don’t sense much if any opposition to this bill. UPDATE– As of February 20, 2018, this bill has passed both chambers and awaits the Governor’s signature.

Finally, HB1668 relating to high risk contracting has passed the House and is in committee in the Senate. UPDATE– As of February 21, 2019, this bill passed the Senate with amendments and is currently on the House calendar for consideration of the amended bill.

I’ll update this further as the results come in. If you want to get a good idea of the bills that affect construction in Virginia, the list of bills being followed by the AGC ov Virginia is a great place to start (not to mention a membership in the AGC of Virginia gives you a voice in this stuff!)

I have discussed the ConsensusDOCS here at Musings on a few occasions. These relatively new form documents, endorsed by the AGC among other trade organizations, are a great counterpoint to the AIA documents that we all are more than familiar with and as construction attorneys and contractors have likely reviewed on numerous occasions.

Of course, like with any form documents, either use the ConsensusDOCS as written or not at all because they have been drafted to work together as written. Changing the wording of any set of form contracts in places aside from the “fill in the blank” areas can only lead to inconsistencies and work for your lawyer should something go wrong.

I encourage you to review the ConsensusDOCS and poke around the new web based interface and then come back and let me know what you think.

As always, I welcome and encourage your comments below, please share your thoughts. Also, please subscribe to keep up with the latest Construction Law Musings.

The first of these was the fact that a new private sustainability rating system is ready for launch. The Institute for Sustainable Infrastructure (or ISI) is seeking public comment on its proposed envISIon. This new system (aptly dubbed Version 1.0) will go “live” in July for comment. Why mention this new system? First of all, ISI’s founding members are the American Society of Civil Engineers (ASCE), the American Public Works Association (APWA) and the American Council of Engineering Companies (ACEC). This trio gives the new program some fairly heavy weight backing. Second, while there are rating systems aside from the ever present LEED, none have taken hold in any real way to compete with LEED. I am curious to see if the envISIon system has any better luck. Finally, this shows that sustainable building is of interest to more than the USGBC and those of us that discuss LEED on a daily basis. I find this to be a great thing that could lead to more societal acceptance of sustainable practices as a standard practice rather than a goal.

Hopefully such efforts will offset the other two notes that caught my eye recently.

The first of these is the foreclosure of the Chapel Hill, North Carolina Greenbridge project. This project is well documented at my friend Doug Reiser’s (@douglasreiser) Builders Counsel blog so I won’t further discuss the details here. However, the question that Doug asks is a good one, i. e. were the “green” elements of the project to blame?

While I agree with Doug (a fellow construction attorney) that green building does not inherently cause issues. I do wonder if the developer and Bank of America bit off more than it could chew as far as the elements it incorporated. The project hit delays and eventually the mounting costs and time pressures caused the financial plug to be pulled. At the very least, this project is an example of the need for careful planning, contract drafting and vetting of contractors and designers in order to have a construction project such as this succeed.

The third item involves a post script/development in the Destiny USA project in Massachusetts. As a result of failure to meet the requirements of some state tax incentives, Evergreen Solar, the provider of solar panels to the Destiny USA project will have to refund $1.5 million and may have to repay other grant money that it received based upon the green and job creation promises of the project. As discussed here and elsewhere, much discussion has focused upon the green building aspects of this debacle. Interestingly however, the cited reason for the penalty is the failure to meet the job creation targets, not to the green building goals. As pointed out by my friend Shari Shapiro (@sharishapiro) at her Green Building Law Blog, this allows the state of Massachusetts to avoid any controversy or debate over the effect of the sustainability promises (both private and public).

Are there other “green” items that you find interesting in the news? If so, please let me know in a comment.

This year marks the Centennial of the Associated General Contractors of America and the AGC of Virginia. This year’s conference (held January 24-27, 2019) at a new venue , the Greenbrier in White Sulfer Springs, VA, celebrated that milestone.

I have been to many of these over the years and discussed the great marketing and educational opportunities that arise from attendance. This year was no different. The attendees were able to take advantage of a beautiful sporting clays course, good food, a casino and various other activities from a Friday night dance party with a “Decades” theme to “Black Jack 101.” The contractors even woke up early Saturday morning to listen to me as part of a panel of Virginia construction attorneys give a legal update. Thanks to all that attended, I hope you got some good information. And, yes, that is a Greenbrier key card with my firm logo (thanks to the planning committee for the opportunity to be a key card sponsor this year).

With all of that said, I still maintain that the most important part of the weekend (for both contractors and the construction attorneys that serve them) was the networking. Not only did I get to visit with and cement friendships and business relationships with those I know, I meet someone new each and every time I hit the road from Richmond and head to the appalacian mountains. I have always found that, even in today’s social media saturated world (of which I am an enthusiastic part), the opportunity to chat, shake hands, and even laugh with friends, clients and potential business sources is an invaluable way to keep a business going.

While having a social media and internet presence is almost a necessity, I find that in person contact creates a trust level and connection that will create a more solid relationship with a general contractor (if you’re a sub) or any other construction company (for those who seek them as clients). At least in Virginia (and I’d be surprised if it is any other way in other states) a level of knowledge about who you are dealing with is key to both obtaining and getting paid for work. Participation in an organization like the AGC of Virginia is a great way to meet and start building new relationships and to cement already existing ones. If you aren’t a member, I hope you’ll consider joining. If you’re already a member, I hope to see you at the 2020 convention.

In sum, this past weekend was great. Thanks to all that I met and chatted with. If I didn’t say “hi” and you’re a friend, I apologize and will catch up next time.

As always, I welcome your comments. Also, please subscribe to keep up with this and other Construction Law Musings.

We all know that the contract is king in Virginia. We also know that Virginia will allow for a so called “incorporation” clause that will allow for “flow down” of certain prime contract provisions in a way that will make those provisions applicable to subcontractors. We also know that a claim for breach of contract or other contractual claim does not last forever due to certain statutes of limitation found in the Code of Virginia. What happens when all of these elements crash together in one place leading to litigation? Well, a relatively recent case from the Virginia Supreme Court gives at least a partial answer.

In Hensel Phelps Construction Company v Thompson Masonry Contractor, Inc, the Virginia Supreme Court considered a claim that arose from construction at Virginia Tech by Hensel Phelps. The construction concluded in 1998 (remember that date). The Prime Contract included language concerning a one year “Guarantee of Work” as well as fairly typical Warranty of Workmanship” language. However the Prime Contract also stated that the one year guaranty term did nothing to affect any other limitations period for any other action pursuant to the Prime Contract (this is important as well because Virginia Tech was not subject to any statute of limitations due to its status as an agency of the Commonwealth of Virginia). Final payment was made to Hensel Phelps and subsequently to the subcontractors in 1999.

In April of 2012, Virginia Tech asserted a claim for over $7,000,000.00 against Hensel Phelps for defective workmanship and related costs. Hensel Phelps of course demanded that its subcontractors pay their share of these costs and made this demand in October of 2013. Finally, in 2014, Hensel Phelps paid $3,000,000.00 to Virginia Tech to settle these claims and in that same year, more than 5 years after substantial completion, filed an action for breach of contract and indemnity against the subcontractors. The subcontractors filed pleas in bar asking the court to dismiss the claims as barred by the statute of limitations. The Circuit Court dismissed the suit and Hensel Phelps appealed.

Hensel Phelps’ two basic arguments were (1) that the flow down provisions of the subcontracts that incorporated the warranty and guaranty obligations of the Prime Contracts acted as a waiver of the statute of limitations for any such claims because of the lack of a statute of limitations as applied to Virginia Tech, and (2) that even if the statute of limitations applied, the statute did not accrue until until the date of the 2014 settlement because the 2014 suit brought an indemnification claim or at the very least the failure of the subcontractors to make good on their indemnification obligations in 2013 was a second breach of the contract aside from the failure to properly construction the building.

The Virginia Supreme Court rejected both of these arguments. As to the waiver argument, the Supreme Court stated that (1) the general incorporation language of the subcontracts was not enough to constitute an express waiver of any statute of limitations and (2) even if such a waiver could be incorporated, the particular “waiver” was not part of any contract, but part of the Virginia Code and therefore by definition could not have been contracted for by Hensel Phelps and therefore could not be incorporated through a flow down provision.

As to the accrual argument, the Court dismissed this argument stating that (1) the claim made by Hensel Phelps was not an action for indemnification that fell within an exception to the statute of limitations, and (2) that the express indemnification provision of the contract was overly broad and sought to indemnify Hensel Phelps from its own negligence in violation of the Uniwest v. Amtech case (recommended reading) and was therefore unenforceable, and (3) that there was no continuing obligation or option to perform or indemnify and therefore the express indemnification provision, if enforceable, would have created the only obligation.

Therefore, the Court reasoned, because the actual breach (as opposed to damages) occurred more than 14 years prior to any suit by Hensel Phelps and because any indemnification provision was unenforceable, the Circuit Court was correct in dismissing the Hensel Phelps claims with prejudice.

Aside from my usual admonishment to consult with an experienced construction attorney and do so early in the contracting process, my big take away is to draft your indemnification provisions carefully so as to meet the terms of Uniwest, particularly in the case of contracting with a state entity that does not have the same “limitations” on its time for suit as you do. Without doing so, you could be indefinitely exposed to potential un-reimburseable damages.

As always, I recommend that you read the case for yourself. Once you’ve had a chance to review it, please let me know if you have comments.

As always, I welcome your comments below. Please subscribe to keep up with this and other Construction Law Musings.

Last week, I highlighted a statute of limitations bill that will be considered by the Virginia General Assembly because it has a major effect on interactions between construction contractors and the Commonwealth of Virginia. However, that is not the only interesting piece of legislation being proposed this 2019 session. Here are two others that I will be keeping track of as this legislative session progresses.

HB1668– Requires review of “high risk” contracts with the Commonwealth to be reviewed and for those administering those “high risk” contracts to have special training. “High Risk” is defined in the bill.

Thus far, these two are still alive in the process. There were others, but those have either been tabled or have died in committee.

If you know of others of interest to contractors in Virginia or their counsel, please let me know.

As always, I welcome your comments. Also, please subscribe to keep up with this and other Construction Law Musings.

Provides that no action may be brought by a public body on any construction contract, including construction management and design-build contracts, unless such action is brought within five years after substantial completion of the work on the project and that no action may be brought by a public body on a warranty or guarantee in such construction contract more than one year from the breach of that warranty, but in no event more than one year after the expiration of such warranty or guarantee. The bill also limits the time frame during which a public body, other than the Department of Transportation, may bring an action against a surety on a performance bond to within one year after substantial completion of the work on the project.

In short, it gives a contractor performing work for a Virginia agency the peace of mind that it will not have unlimited responsibility for its work by limiting its contractual liability period to five years and its warranty obligations to no longer than a year after the expiration of any warranty. The bill would further limit the liability of a surety under a performance bond, thus allowing sureties and their principals to move on to other projects without the corresponding hit to the principals overall bonding capacity after a period of time.

In my opinion this would be a good addition to the Virginia Public Procurement Act and allow better business for all involved.

I will keep an eye on the progress of this bill,among others that will be of interest to construction professionals in Virginia, once the General Assembly session begins.

What are your thoughts on this bill? Please share your thoughts below.

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As readers of Construction Law Musings can attest, I am an enthusiastic (if at times skeptical) supporter of sustainable (or “green”) building. I am solidly behind the environmental and other benefits of this type of construction. However, I have likened myself to that loveable donkey Eeyoreon more than one occasion when discussing the headlong charge to a sustainable future. While I see the great benefits of a privately built and privately driven marketplace for sustainable (I prefer this term to “green” because I find it less ambiguous) building stock and retrofits of existing construction, I have felt for a while that the glory of the goal has blinded us somewhat to the risks and the need to consider these risks as we move forward.

Another example reared it’s ugly head recently and was pointed out by my pal Doug Reiser (@douglasreiser) at his Builders Counsel Blog (a great read by the way). Doug describes a project that I mentioned previously here at Musings and that is well described in his blog and in a recent newsletter from Stuart Kaplow (@stuartkaplow), namely, the Chesapeake Bay Foundation’s Philip Merrill Environmental Center project. I commend Doug’s post for a great description of the issues, but suffice it to say that the Chesapeake Bay Foundation sued Weyerhauser over some issues with a sustainable wood product that failed. While the case was dismissed on statute of limitations grounds, the case illustrates issues that arise in the “new” sustainable building world.

While at bottom, the legal considerations for us construction attorneys are not all that different (breach of contract, construction defects, failure to meet plans and specifications), some of the risks inherent in the process are either new or old ones wrapped in new materials. In short, we’re using old materials in new ways and using new materials that hadn’t been used before in these types of projects. This means that we don’t have the years of engineering data to back up proper use of these materials and this can lead to issues over time.

My fear is not that energy efficiency and other benefits of sustainable building will not be met, but that failure to see and anticipate these risks will lead to setbacks in the process. On major problem with a “green” project (LEED or otherwise) will do more to slow the process than taking our time and doing things right the first time. As my dad used to say: its better to be 5 minutes late than speed to be there “on time” and get a speeding ticket that slows you down even more.

Thanks again to Doug and Stuart and please let me know your thoughts. Am I off base? What do you think?

As always, I welcome and encourage your comments below, please share your thoughts. Also, please subscribe to keep up with the latest Construction Law Musings.

One of the first questions that I ask is whether these contractors and subcontractors hold a contractor license from the Commonwealth of Virginia. While most do, some do not, likley because they are unaware of the requirement in Virginia that all contractors be licensed when performing work in the Commonwealth. While I haven’t done an exhausive survey of the statutes and regulations of every state of the union on this point, the confused silence leads me to believe that such is not a requirement in every state. The most common reaction after “I had no idea I needed one” is that the general contractor holds a license so they did not think they needed to hold one. As I stated above, this is incorrect.

These days in construction, and other pursuits, teaming agreements have become a great method for large and small contractors to work together to take advantage of various contract and job requirements from minority participation to veteran ownership. With the proliferation of these agreements, parties must be careful in how they draft the terms of these agreements. Without proper drafting, the parties risk unenforceability of the teaming agreement in the evewnt of a dispute.

One potential pitfall in drafting is an “agreement to agree” or an agreement to negotiate a separate contract in the future. This type of pitfall was illustrated in the case of InDyne Inc. v. Beacon Occupational Health & Safety Services Inc. out of the Eastern District of Virginia. In this case, InDyne and Beacon entered into a teaming agreement that provided that InDyne as Prime would seek to use Beacon, the Sub, in the event that InDyne was awarded a contract using Beacon’s numbers. The teaming agreement further provided:

The agreement shall remain in effect until the first of the following shall occur: … (g) inability of the Prime and the Sub, after negotiating in good faith, to reach agreement on the terms of a subcontract offered by the Prime, in accordance with this agreement.

InDyne was subsequently awarded a contract with the Air Force and shortly thereafter sent a subcontract to Beacon and requested Beacon’s “best and final” pricing. Beacon protested by letter stating that it was only required to act consistently with its original bid pricing. Beacon then returned the subcontract with the original bid pricing and accepting all but a termination for convenience provision. Shortly thereafter, InDyne informed Beacon that InDyne had awarded the subcontract to one of Beacon’s competitors. Beacon of course sued and argued that the teaming agreement required that InDyne award the subcontract to Beacon.

The Court disagreed. After several paragraphs of analysis of the arguments of the parties, and with reference to the above quoted language, the Court found this language to create an agreement to negotiate in the future that is unenforceable. In doing so the Court stated:

Although Beacon makes a strong case that the teaming agreement is more definite than those found by courts to be unenforceable under Virginia law, “[w]ell-established precedent compels us not to impose a subcontract on parties to a teaming agreement when they have expressly agreed to negotiate the material terms of a subcontract in the future.” The parties chose to have Virginia law apply to the terms of the teaming agreement. Under the clear precedent in Virginia, this teaming agreement is unenforceable.

In short, where a teaming agreement expressly states that the parties still have some negotiating work to do on material terms of any subcontract moving forward the teaming agreement will not likely be enforceable by its own terms in the event that the parties fail to agree to the terms of any future subcontract.

As always, I recommend that you read the whole opinion yourself in consultation with an experienced Virginia construction attorney to both double check my analysis and to assure that any teaming agreement will be enforceable.

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